Two major agribusiness groups are scrambling to fix a flaw in the new tax law that offers a big tax deduction to farmers who sell their crops through cooperatives but not when they deal with privately owned merchants. The flaw was created when lawmakers tried to replicate the benefits to farmes from a provision of the old tax code, known as Section 199, that was eliminated by the new law.
In a joint statement, the National Grain and Feed Association, with co-op and independent members, and the National Council of Farmer Cooperatives, which defended Section 199 during the tax overhaul, said they “are committed to reaching a solution in a thoughtful and expeditious manner, and to working with Congress to address this issue promptly.” Agriculture Undersecretary for Marketing Greg Ibach applauded lawmakers for work “to correct the disparity…USDA stands ready to assist in any way necessary.”
In a memo to members, the NGFA said its staff, as well as staff workers for farm-state senators, heard in early January that the replacement language, called Section 199A, meant that farmers who dealt with co-ops “would be able to significantly reduce their income tax liability — to the point that it would influence where and with whom they market their products.” Section 199 allowed co-ops to pass along to their farmer-members deductions that were generated by transactions by the cooperatives. Section 199A made deductions available directly to farmers. The two agribusiness groups are working with tax experts to find an equitable solution that preserves the old benefits without skewing the flow of grain.